Paying Off Debt Through Payday Loans is Not Easy

Paying Off Debt Through Payday Loans is Not Easy

For many years, traveling couple Smiths have been relying on payday loans locations at various places they have traveled around the country. If the price is high in terms of fee, their rule of thumb is to have an alternate plan, to try getting loans at their local banks but only if their schedule permits. They have never had a problem with these loan offers so far, except that the fees and charges have always been significant in some places compared to what they would borrow in and around their hometown ( mostly a small amount for personal spending). However, if it was high and doesn’t make sense, they would likely opt for another venue along the way.

Payday loans are short-term loans that the borrower is issued based on his or her repaying ability. Here, the borrower’s personal check is held as collateral for future deposit. In a few cases, borrowers can sign the amount that they need to repay over electronic access to their bank accounts. Either way, they pay a transaction fee, the amount depending on various criteria.

Smiths have always done their homework when it comes to loans like this before sailing across the world. First, they would compare the various options that they have. Second, they would ignore the significant transaction cost when the cash is for an emergency situation. And third – most importantly for the Smiths – they value time, are well-off and don’t bother on saving much. For people with tight budget who are unlike Smiths, however, planning ahead is important when it comes to these loans. Writing a personal check only makes sense when you are sure that the money is in the account currently or will be in the near future. The lenders will deposit the check or withdraw the amount when the borrower’s next payday is due. The charges, if any, should be paid in a single lump sum and according to the terms specified.

Paying off debt through payday loans is not only easy but convenient as well. The borrower can redeem the check offered or pay by cash wherever appropriate. Sometimes, the lender may allow the borrower to rollover the loan to another pay period. Other times, the borrower will be required to allow for multiple authorization of payments from the bank account. These payments will be typically withdrawn on each pay date.

The amount of loan that the borrower can borrow ranges from $100 to $5,000 depending on the legal maximum set by a particular state. These loans cost around 400% in annual interest rate in some cases. Then there are finance charges of certain percentage added to the interest. Loans of shorter term have higher APRs and rates are higher in places where there is no cap for the maximum cost. This is steep compared to credit card borrowing. However, the loan terms are flexible when it comes to eligibility of the borrower. Not all people are eligible for credit cards, but anyone with a personal check or collateral can qualify for such loans.

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Karen Sousa